The First Great Recession of the 21st Century

The First Great Recession of the 21st Century

Competing Explanations

Edited by Óscar Dejuán, Eladio Febrero and Maria Cristina Marcuzzo

The 2008–10 financial crisis and the global recession it created is a complex phenomenon that warrants detailed examination. The various essays in this book utilise several alternative paradigms to provide a plausible explanation and a credible cure. Great detail is given to this important analysis from different theoretical perspectives, presenting a clearer understanding of what went wrong and expounding misinterpretations of current theories and practices.

Chapter 6: Does the Current Global Crisis Remind us of the Great Depression?

Sunanda Sen

Subjects: economics and finance, financial economics and regulation, history of economic thought


Sunanda Sen As recently claimed by the present Fed Chairman, Ben Bernanke,1 the intensity of the current global economic crisis, in terms of its damaging effects over a decade or more, will be far less than that of the Great Depression of the 1930s. Recalling the past, Bernanke reminds us that the Depression of the 1930s lasted for at least 12 long years and caused the unemployment rate to move up to 25 per cent. Also, it caused the GDP to drop by one-third, the banks to crash by about a third and stock markets to collapse by 90 per cent. Bernanke also points to the fact that, unlike today, there was no provision of social safety nets in the 1930s. However, he warned that the Wall Street crisis is the worst the nation has faced since the end of World War II and also urged Congress to take action on a proposed bailout package. Confirming the fears of a more severe crisis, George Bush, the former President of the USA, came up with a warning that the current crisis could be even more serious than the one that took place in the 1930s.2 Of late there have been sharp differences among economists in comparing the current crisis to the days of the Great Depression. Thus, for Barry Eichengreen and Kevin O’Rourke, the world is already on the path to another global depression while for Romer it is still a far cry from the calamities of the Great Depression...

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